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Registering Your Initial Public Offering with the SEC

FinanceLegacy

Many business owners view an initial public offering (IPO) as the brass ring. They work tirelessly to create value in their company with the eventual goal of going public. But as much work as building a company is, preparing for the IPO is hard work, too. Securities offerings are highly regulated by the Securities and Exchange Commission. Unless you qualify for one of the SEC's exemptions, you will need to file an astounding amount of paperwork before your IPO. You may also be required to file annual updates with the SEC. Your first step will be to file a registration statement with the SEC. There are two main components of the registration statement.

Part 1: the prospectus. This part of the statement will include all the pertinent facts about your business and the offering, including financial statements, information about the management team, and other pertinent information. You must make the prospectus available to anyone who is willing and able to participate in the IPO.

Part 2: additional information. This will include information not listed in the prospectus, including expenses of issuance and distribution, indemnification of directors and officers, recent sales of unregistered securities, and other information. While you don't need to make this information available to prospective investors, determined individuals will be able to find it in the EDGAR database on the SEC Web site.

Luckily the SEC makes it relatively easy for you to file your registration statement: their Form S-1 [PDF format] sets out all the information you must submit to begin the registration process.

You can also complete the entire registration process online, with the SEC's EDGAR system. While filing online with EDGAR may be convenient, it is far from simple. Your best bet is to download the EDGAR manual in Microsoft Word format. The manual describes, in mind-numbing detail, exactly how to submit your registration "paperwork" via EDGAR.

There is no set time frame for the SEC to respond to your submission, but they do say that they will work with submitters to meet their filing goals. Bear in mind, though, that there may be several rounds of back-and-forth between you and the SEC, as clarifications and corrections are requested and made. The SEC makes no guarantees about when — or even if — your submission will be approved.

Once your registration is approved, you can move forward with your public offering. But your reporting duties will continue, at least through the end of the fiscal year in which you register. You will need to provide information about:

  • Your company's operations
  • Its officers, directors, and certain shareholders, including salary
  • Transactions between the company and management
  • The financial condition of the business, including independently audited financial statements
  • Its competitive position and material terms of contracts or lease agreements

Depending on the size of your company, you may also be required to file occasional reports with the SEC after the end of the first fiscal year. You will be required to provide updates if:

  • your company has more than 300 shareholders of the class of securities offered, or
  • your company has more than 500 shareholders of the class of securities offered and more than $10 million in total assets for each of its last three fiscal years.

One final caveat: Once you file your SEC registration, the information contained therein becomes a matter of public record. Anyone who has applied for and been granted access to the SEC's EDGAR database can access this information. For this reason and others, you should enlist the help of an attorney and an investment bank. They can help you complete your filings to satisfy SEC requirements while balancing your need for corporate privacy.